Meta

Month: May 2016

The Alliance for the Defeat of Citizenship Taxation will retain James J. Butera in the lawsuit against the United States regarding citizenship-based taxation.

In a related matter, on September 8, 2014, our sister organization, the Alliance for the Defence of Canadian Sovereigntyhired Washington-based attorney James Butera of Jones Alkers LLP to advocate specifically for “Accidental Americans” – “those who are not U.S. citizens in any normal sense of the word” but who meet the technical, administrative definition of “U.S. person” but who have lived all their lives in Canada and feel no real connection to the United States.

“Growing numbers of Canadians dispute the right of the United States to impose U.S. citizenship on them without their express consent,” Mr. Butera says.

from The Alliance for the Defence of Canadian Sovereignty website:

WASHINGTON D.C. ATTORNEY Mr. Jim Butera of Jones Walker LLP files a submission on behalf of the Alliance to the United States Department of State pointing out that the renunciation fee increase from US$450 to US$2,350 violates the Expatriate Act of 1868 and the U.S. Administrative Procedure Act and must be immediately suspended. Read Mr. Butera’s able submission and our press release in English and in French.

Mr. Butera has a J.D. from Georgetown University Law Centre and was admitted to the Bar of the District of Columbia in 1973. His areas of specialty are Banking & Financial Services and Government Relations & Legislative Advocacy. He has argued cases in the U.S. Court of Federal Claims,U.S. District Court for the District of Columbia, U.S. Court of Appeals, Federal Circuit and the U.S. Supreme Court.

Mr. Butera entered law school at Georgetown University Law Center after serving as Captain in the United States Marine Corps. He served two combat tours in Vietnam as a Lieutenant. His decorations include the Bronze Star Medal, the Purple Heart, a Navy Commendation and two Presidential Unit Citations. He has published law review articles on a variety of topics, and was a contributing author to Jaws of Victory, an analysis of presidential politics published by Little, Brown & Co.

After graduating with his juris doctor degree, he began his law and government relations career on the staff of the American Bankers Association. From 1974 to 1989, he handled federal government matters for the National Council of Savings Institutions, a major Washington-based national trade association. During his tenure at that association, Mr. Butera directed its government affairs program and served as the organization’s Executive Vice President. Mr. Butera served on a federally-appointed financial institutions Advisory Council in 1987 and 1988. In 1988, he was among the industry experts selected to prepare The American Agenda, under the direction of former Presidents Carter and Ford, to identify the major banking issues facing the incoming Administration.

Mr. Butera has been at the forefront of another FATCA-related case since 2013; the Florida and Texas Bankers Associations filed suit in order to prevent releasing private banking information of their clients. Please see:

The Cato Institute has some interesting observations about the case; along with the National Federation of Independent Business has filed an amicus brief in support of Supreme Court review.

The Florida and Texas Bankers Associations are trying to challenge this regulation, but are being frustrated by interpretative jiggery-pokery that prevents their serious legal arguments from even being heard. While the federal district court allowed this lawsuit to proceed, the U.S. Court of Appeals for the D.C. Circuit reversed course and held that the associations couldn’t challenge the regulation because, under the Anti-Injunction Act (AIA), one can’t challenge a tax until the government has attempted to enforce the allegedly improper law and collect the attendant tax.

One of Brock’s finest authors, Eric regularly posts on the inconsistency of reporting figures regarding renunciation. As far as I recall, he is the first person to bring to light, the contrasting numbers to be found on the FBI’s NICs list, which generally refer to far more than the “Name and Shame List” provided on a quarterly basis by the U.S. Treasury.

All of the people added to NICS definitely paid the US$2,350 State Department fee — twenty times that in other developed countries — which has been in effect for renunciants since September 2014, meaning that Washington D.C. collected at least US$3 million from people seeking to exercise their human right to change their nationality last quarter. The State Department claimed this obscene fee “protects” the right to change nationality — well, that’s one mighty profitable protection racket they’ve got going on there! (And it could have been even more profitable if some consulates weren’t restricting renunciation appointments to an hour a week, leading to ten-month backlogs in Dublin and Toronto.)

Today, the International Consortium of Investigative Journalists (ICIJ) released names of people connected to offshore accounts managed by Mossack Fonseca, the firm in question regarding the “Panama Papers.” From the moment I heard about this, I felt there was a strong possibility we could turn this bombshell to our advantage by emphasizing three facts:

We have legitimate accounts in the countries we live in regardless of whether the US considers them “foreign”

We are strong contrasts (i.e., tax compliant/law abiding as demonstrated in our countries of residence) to those named in this debacle

Unlike those linked to Mossack Fonseca and specific criminal activity, there is nothing whatsoever to suggest those with US taint, living in their (“foreign”) country of residence, have done anything wrong

No big thoughts here or grand revelations. Just three simple distinctions to be made and repeated over and over, until those who are so thick they cannot see past a cliché finally wake up. Doesn’t matter whether they are dishonest politicians/civil servants or your not-so-favourite Auntie in the States. They all are wrong, period. Maybe we just haven’t “come into our time yet” – i.e., we get it and have been fighting it but the rest of the world is just now catching up to us. We must keep this up. Part of the “given” in “what’s right always wins” is staying the course until “the wind blows your way.”

The first tweet I saw this morning was the one above. Really liked the “small-enough-violin” image and curious enough to read it (even though I saw “BEPS” in the first paragraph).

At any rate, I laughed so hard the tears were running down my face. The irony, hypocrisy and completely delusional state of mind of the U.S. and it’s representatives such as Stack, is beyond comprehension.

I think we’ve found it!

(NB: MNE= Multi-National Entity)

The best ones/excerpts:

Countries participating in the OECD/G20 base erosion profit shifting (BEPS) project sought to rewrite international tax rules for the digital economy and for intellectual property to increase their tax take at the expense of the United States, said Robert Stack, Treasury deputy assistant secretary (International Tax Affairs), May 13, at a National Tax Association conference in Washington.

When the Isaac Brock Society started, one of the major issues was that we questioned what we were being told; not just by the U.S. government but specifically, by the tax lawyers and accountants. It became painfully clear that many simply did not know what they were saying; some did not have direct cross-border experience and others simply repeated what their colleagues were saying. Sometimes they could not quite believe we would question their judgement or not be scared into believing what they said. Some of the concepts were fairly mundane while others, such as 877A being retroactive, were overwhelming. The story about PFICs is unbelievable and the application of interest etc, goes back to 1986.

When I first saw this, I thought of making a post just from Tom Paine’s longest answer. After thinking about it, I decided it would have more impact if seen in the context it was offered.I find it quite telling that after the initial question was asked, this person offers themself as an expert and seems to assume being a CPA/CA is ample proof of that. Tom Paine’s first comment clearly indicates he knows what he is talking about. Notice how the compliance person does not pick this up right away. And the contrast between: “The IRS considers TFSA’s ….” to “The IRS hasn’t given any gudiance…” But then THIS… “TFSA’s have that “wary” factor (i.e., “the IRS doesn’t say so but you better be sure and do it this way”). When that isn’t enough, relies upon Phil’s post. If this person was a specialist and really understood what a foreign trust was, wouldn’t one expect some clear explanation to indicate it? Would you be willing to pay this person $500 for a 3520A and another $500 for a 3520 ($500 being a standard starting fee for extra forms…). After Tom Paine’s last statement, there were no further comments from the CPA/CA.

Q. Need some help please. I have an account with a company called PI Financial in Vancouver. It is not a traditional walk in bank but a financial institution that manages money. I have one Tax Free Savings Account with them that I bought stock with from one Canadian company. Besides the initial deposit of money and the purchasing of stock from one company, there has been no transaction, gains, or interest on my account. It simply holds stock.
How do I handle this on my USA taxes? My accountant at H and R block says he needs to read my terms of conditions with PI Financial as he is unsure what forms I need to do for it. He mentioned something about possibly being a “foreign trust” and if it is he may need to send a form to two different offices in the states, ect, ect. It was alarming that he seemed unsure.
Any guidance on what additional forms I need to file on top of the 1040 for a financial account (Tax Free Savings Account) that holds stock from one Canadian company?

*****

L. Hi Phil,
I am a California CPA and Canadian CA. I specialize in cross border taxes. I can go over this with you. Can you email me at xxxxxxx@gmail.com.

Tom Paine Unlikely it would meet the definition of a trust under U.S. law. If not, then it’s not a trust. If it’s not a trust, it’s not a foreign trust.

L. A TFSA (tax free savings account) is the equivalent of a Roth IRA for Canadians. The IRS considers TFSA’s to be trusts.

Tom Paine Is that written in one of their publications or on their site somewhere?

L. Actually, I misspoke the IRS hasn’t given any guidance on TFSA’sso a protective response is to treat them like trusts. TFSA’s have that “wary” factor….

Tom Paine Yes, but the problem becomes if one files the 3520, how does one stop filing it? Here is a link to an IRS definition of a trust (and there may be others). It says: “In general, a trust is a relationship in which one person holds title to property, subject to an obligation to keep or use the property for the benefit of another.” This is not what a TFSA really is. It’s just a place to store money to get a tax free gain. The bank is no way required to do anything for the benefit of the owner of the TFSA.

L.This might be helpful:
Canadian TFSAs and the Certification Test
Hi, it’s Phil again and we’re talking about Expatriation again. Every other Tuesday, it’s…
HODGEN.COM

Tom Paine This article focuses primarily on the fact that the income inside the TFSA is income from a U.S. perspective. It also notes that if the TFSA holds mutual funds then it would be PFIC income. What the article also makes clear (see the discussion of the Mexico situation, etc.) is this: The fact that the word “trust” is in the description in Canada or Mexico does NOT make it a “trust” for U.S tax purposes. The article quotes this relevant part of the Treasury regulations: “the purpose of the arrangement is to vest in trustees responsibility for the protection and conservation of property for beneficiaries who cannot share in the discharge of this responsibility”. Note the words “cannot share in the discharge”. The words “cannot share in the discharge” suggest that the taxpayer would lose all control over the investment decisions. It is very difficult to see how UNDER U.S. RULES a TFSA is a foreign trust. Let me say why I cam continuing this discussion. The simple and dirty truth about U.S. tax compliance for Americans abroad is that the tax preparers create the law. Once a critical mass of tax preparers starts to take a specific position it becomes (in effect) the law because that is what the IRS expects to see. Once the IRS expects to see a Form 3520 (whether required or not) it becomes riskier to not file one. This is NOT because the law requires it, but because the IRS is used to seeing it. The best advice for those second class Canadian citizens – AKA “US Property” – (A Canadian is a Canadian NOT) is to avoid the problem altogether by not using TFSAs and renounce U.S. citizenship at the earliest possible moment. Those who do have TFSAs should sell them. Those who have them and have not been filing 3520s should NOT start. Those who want to file the 3520 because there is a chance that somebody in the IRS might consider the TFSA to be a foreign trust MUST also file Form 3520A (which needs to be filed by March 15 – before the due date of the 1040). It’s not just one form. It’s two.

My personal favourite is an exchange I had with a lawyer who represented the immigration side of a tax firm. He had made a statement that “a CLN was and had always been a requirement.” I said that I was relatively sure that was not the case. He then said he thought it was “one of those things that had always been the law but had never been enforced.” A clear mis-linking to the Reed Amendment. It horrifies me to know the charge to expats who go with this “expert.” (I then went back and read the INA from 1940 onwards and nowhere does it say a CLN is required; it merely says if the consulate knows a person has taken an action and lost U.S. citizenship, they should mail one if they know where to send it). As much as we have challenged these sorts of things since we began, I wonder how many we still simply accept and are possibly not true?

“Check out the top 20 Tax Blogs in 2015! “During 2015 readers of Tax Connections Worldwide Tax Blogs arrived from more than 200 countries and spent an average of 12:45 during each visit. These are mighty numbers…”

Interestingly, of the 20, at least 10 of them, dealt with issues that affect us.

Your problem IS actually attempting to live as a “tax compliant” U.S. citizen outside the United States. It’s easy to live as a U.S. citizen abroad who is NOT “U.S. tax compliant”. What is very difficult is to live as a “U.S. citizen abroad” who IS “U.S. tax compliant”.

U.S. citizens, regardless of where they live in the world, are subject to exactly the same provisions of the Internal Revenue Code. At first blush you might think this is fair. No.

The problem is that the U.S. tax code imposes punitive taxes and reporting requirements on “all things foreign to the U.S.”. As a U.S. citizen abroad, your life is completely “foreign to the U.S.”. Therefore, your life will be subject to punitive taxes and reporting requirements. You will learn this as you become more and more U.S. tax compliant.

This situation is not about tax.
Those drawn up in this mess do not have tax problems.
They have compliance problems. Once filed, THEN they WILL have tax problems.

So what say the accountants and lawyers. You won’t owe any income tax. Unlikely to receive penalties, fines, interest. So what’s the big deal?

By governments not addressing what the tax laws actually mean–in the life experience of those affected(including their immediate “alien” families) they are disabling a whole class of citizens from participation in the normal opportunities available to other citizens, based upon nothing less than a U.S. claim of ownership; due in most cases merely for having been born there.Continue reading It’s NOT the Taxes its the Effect on Real Lives Stupid